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9/14/15

China is dumping U.S. debt

So should Americans be concerned that China has started dumping some of its Treasury holdings because it is no secret China is the largest holder of US debt ?

After all, it raises serious questions about whether China will keep lending Washington money to help finance the federal deficit in the future.

But right now, China is selling because it's in dire need of cash. Recently, it unleashed multiple moves to support its markets and prevent its currency from a freefall, while at the same time trying to stimulate the economy.

China owned $1.3 trillion of U.S. Treasuries as of June, making it the biggest holder of U.S. debt.

But China's foreign-exchange reserves plunged by a record $94 billion in August, according to the country's central bank, leaving it with a war chest of $3.6 trillion. Analysts say it's very safe to believe a big chunk of that decline occurred due to a reduction in U.S. Treasury holdings.

The selling and the potential that China will not be buying U.S. debt in the near future raises questions on its potential to increase America's borrowing costs.

Read more: China is dumping U.S. debt - Sep. 10, 2015

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